Select Committee on Agriculture Appendices to the Minutes of Evidence


Letter to the Committee Chairman from the Chairman of fountains plc (K 8)

  You may recall that, back in 1996 when you were a regular contributor to Farming News, you very kindly provided a foreword to my book, The Farming Business—an industry accounting and auditing guide published by the Institute of Chartered Accountants in England and Wales.

  I write now in my capacity as Chairman of fountains plc. We are a publicly quoted company which, within the group, has exposure to forestry markets in the UK, through Fountain Forestry Limited and in the USA through Fountain Forestry Incorporated.

  In total we manage around 450,000 acres in the UK and USA. I must apologise for writing to you on your deadline of today—I have only just become aware that the Agriculture Committee were planning a short enquiry into the work of the Forestry Commission.

  I am including as an attachment to this e-mail, a copy of an article [not printed] which was recently published by Timber Grower Magazine entitled, "fountains pledges future to forestry".

  From this article, I would in particular, draw to you attention, an extract from the first page as follows, "The UK market is however, different to the US market with much more rigid regulatory framework and a dominant public sector operator, the Forestry Commission. Owners of commercial forestry in this country are bound to be increasingly troubled by the continuing low timber prices. They might well ask whether there are some structural issues within the industry which could usefully be tackled to bring about an improvement in the economic drivers by comparison to the major international market of the USA".

  Whilst I can recognise and note that the Forestry Commission has done some extremely valuable work during the last 80 years of its existence, the Committee might well question whether the Forestry Commission can really sensibly combine the three roles which it undertakes. It is, at the same time, an advisor to government on forestry policy, the forestry industry regulator and the largest commercial forestry operator in the country. It was interesting to note recently that the Chancellor of the Exchequer decided to instruct the consulting firm W S Atkins to investigate the utilities regulators. In the forestry industry there is stage back from this to investigate the structure within which he regulator is placed. With respect to the Forestry Commission's role as commercial operator, there may slowly be emerging a realisation that they may have effected timber markets over the last two or three years, no only to their detriment but also to the structural position of the timber grower as a whole. I think it is important that the industry understands these dynamics.

  Investment Property Databank have just published the forestry index for calendar 1999. This records timber prices down by some 2.7 per cent—the best performance for timber since 1994.

  Forestry as an asset class declined in value by 10.9 per cent in calendar 1999— Against this troubling background for the industry, the Forestry Commission's role and influence does therefore need to be clearly understood.

  I must apologise for these relatively brief observations on these issues. I hope nonetheless that this may assist your line of questioning.

13 November 2000

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